Small businesses see election as platform for change but feel threatened by uncertainty

Business owners see today`s election as an opportunity to change Britains enterprise culture for the better, with one in five intending to vote for the party they hope will manage the economy most effectively, according to new research from the Forum of Private Business. But many fear their businesses could suffer because of the uncertainty created by unclear tax plans, the threat that spending cuts will jeopardise public sector opportunities and the possibility of a hung parliament.

According to the Forums latest Economy Watch member panel survey, 55% of respondents view the public vote as a platform on which to highlight the issues facing their businesses. Those mentioned most frequently were red tape, economic management and the tax burden. However, 14% of the small businesses surveyed feel threatened by the looming election because of the uncertainty they believe it could create, with many citing a lack of detail on tax plans from the main political parties and possibility of a hung parliament as the main reasons for this uncertainty. In addition, with spending cuts inevitable in order to plug the gap in public finances, the election is viewed as a threat by businesses who undertake a significant proportion of work in the public sector.

Small business owners are generally confident that the election can be used to highlight their concerns and usher in economic change. However, many feel threatened by the uncertainty caused by a lack of defined policies on tax and red tape as well as threats to public procurement in the wake of anticipated spending cuts and the possibility of a hung parliament, said the Forums Policy Representative Matt Goodman. Entrepreneurs want better support, a clearer tax regime including a reversal in the planned National Insurance rise prompt payment and less red tape, although there is some scepticism about the delivery of this last measure.

In all, 18% of business owners consider economic management to be a significant factor that will influence their vote. The same number believe support for small businesses will be one of the main issues affecting their decision at the ballot box. Further, 17% cited a better tax regime as a significant voting factor. Other influential factors included addressing the planned National Insurance rise (10%) and reducing red tape and state interference (9%).

The surveys other findings are as follows:

Business confidenceOverall, business confidence has increased compared to the previous months Economy Watch survey, but more entrepreneurs remain doubtful about growth prospects in 2010. In total, 44% of respondents are confident or very confident compared to the 39% recorded in March. However, more than half (53%) are not very confident, pessimistic or very pessimistic.

Economic indicatorsIn April orders increased for 35% of the businesses surveyed, fell for 25% and remained unchanged for 39%. Turnover increased for 38%, fell for 21% and stayed the same for 41% of respondents. Profitability was up for 33% of businesses, down for 32% and stayed the same for 35%. Late payment was more of a problem for 29% of respondents, less of a problem for just 4% and the same for 67%.

Almost a quarter of businesses (24%) increased investment in sales and marketing (with 11% reducing this spend and 64% indicating no change) and 22% increased investment in machinery and equipment (with 18% spending less and 60% no change). Further, 17% increased staff training, 10% reduced it and 73% made no change. The cost of doing business excluding tax - increased for more than a third of respondents (36%), fell for just 3% and remained unchanged for 61%. The tax burden was greater for 19%, fell for 35% and stayed the same for 78%.

Access to financeFewer business reported better access to finance, with just 3% saying it has improved compared to 6% in March. The same number reported a deterioration as did in the previous month (13%) while 66% indicated no change, up slightly from 63% in March. Better financial management had resulted in businesses being able to better access finance in previous months but respondents reported a number of reasons for a deterioration in April. These include poor returns from invoice discounters, increased late payment by debtors and increased lending charges.

Cost of financeThe number of businesses believing that finance has become more affordable has increased, with 85% reporting it as very affordable or affordable compared to 78% in March. In total, just 10% feel that finance is very unaffordable or unaffordable, which is consistent with the data from the last two months.

Business priorities and needsImproved business and consumer confidence was selected by 26% of entrepreneurs as the main factor that would help their businesses grow up by 2% from March. The next was internal business development, which was chosen by 24% (down slightly from 26%), followed by economic improvements and stability, selected by 21% of respondents (a slight fall from the 25% recorded in March). Other factors were training and recruitment initiatives (11%), specific industry incentives (10%) and addressing finance issues (10%).

Anticipated business investmentOne in three respondents (32%) now anticipate making no investment in their businesses in 2010, up from 24% in March. In all, 45% expect to invest in sales and marketing (down from 54%), 14% in machinery and equipment (down from 18%) and 19% in product and process development (down from 25% in March).

EmploymentEmployee numbers have dropped by 4% over the last year and approximately 8% of businesses have reduced their working hours. Some of the changes were in agency staff or use of contractors. However, a number of vacancies from March remain unfilled despite relatively high levels of unemployment, indicating that some businesses are looking for highly specialised staff.

The monthly Economy Watch member panel survey is carried out as part of the Forums Communications Director business support solution. For more information call 0845 612 6266 or visit here

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